The ECB released the latest monetary developments data for September 2012. As always I tend to focus on the asset side (loans) rather than the liabilities (deposits and debt securities). 

What we see is that loans to households are still in a negative path while loans to non-financial corporations registered a significant negative flow of -€20bn for September. That’s equal to more than 0,2% of Euro 2012 GDP. The total quarterly figure for private lending (adjusted for sales and securitisation) is close to -€15bn which point to rather weak internal demand.

The ECB also released MFI balance sheet data per country. I ‘ll focus on Spain and Italy.


Spain saw a continued decline in loans to the private non-financial sector, with the total loan assets (not adjusted for sales and securitisation) dropping -€5,1bn, compared to a -€14.9bn decline in August and -€13.1bn in July which could be regarded as stabilization. Holdings of general government securities increased in September by €11.6bn reversing course from a fall of €12.7bn during July and August, pointing to a helpful effect from the ECB OMT announcement. On the other hand, holdings of ‘Other euro area residents’ securities continued falling. They lost €35.8bn since June (and €3.8bn in September) which makes one wonder if the increase in government securities holdings had more to do with portfolio rebalancing.

On the liability side, Central  Government deposits increased to €51bn (compared to €32.1bn in August) while deposits saw a healthy increase of both deposits and repos. Debt securities issued saw a decline of almost €8bn during September.


In the case of Italy private non-financial sector borrowing remained negative, falling €6.3bn this month after a fall of €10.6bn in August. Only Non-monetary financial intermediaries saw an increase in their loans. After stabilizing their holdings of government securities during the summer, Italian MFIs also increased them by €9.9bn during September with holdings of other euro area residents securities declining €4.4bn in the same month.

Regarding liabilities, both deposits and repos saw an increase by €22.8bn and €7.3bn respectively with debt securities issued declining only slightly.

In general, the OMT effect seems strong in the case of Italy and Spain but euro area credit creation is negative and the monetary union appears to remain in recession.